Connection problems

The mobile industry will pass a momentous milestone by the end of 2014. According to projections from GSMA Intelligence, the number of mobile connections will exceed the number of people on the planet.

But it won’t be a time for governments and regulators – particularly in developing markets – to pat themselves on the back for a job well done.

Thanks to multiple device ownership in developed economies, along with the growing trend of multi-SIM ownership in emerging markets, GSMA Intelligence finds that 3.6 billion people will have subscribed to a mobile service by the end of the year. True, it’s an enormous figure, but still some way short of the addressable market (around five billion, says GSMA Intelligence).

Things look bleaker when it comes to internet access. According to various estimates there are around five billion people who are not online. That’s about two thirds of the world’s population.

The fact remains that millions of people, through the business case lens of mobile operators, are not worth serving.

In developed markets, regulators have used sticks and carrots to push operators beyond the more lucrative urban areas. Sometimes, it’s been an uphill struggle. In emerging economies, the task is all the more difficult as incomes are much lower.

According to the International Telecommunications Union, the price of an entry-level mobile broadband plan in developed markets is around 1.2 per cent to 2.2 per cent of gross national income per capita. In emerging economies, the figure rises to between 11.3 per cent and a staggering 24.7 per cent.

Mobile operators, understandably, are reluctant to roll out networks in far-flung places where there’s little or no money to spend.

Ovum, a consultancy, reckons national population coverage of a basic mobile network (2.5G) in emerging markets typically falls between 50 per cent and 70 per cent. For 3G networks, penetration can plunge to around 30 per cent.

Despite availability of cheaper network gear, particularly from Chinese suppliers Huawei and ZTE, mobile operators may not see a convincing business case for widespread mobile access in emerging markets, let alone universal reach.

Taking the initiative

Last year saw the emergence of two big industry initiatives aimed at tackling the problem.

One is internet.org, led by Facebook, which has the ambitious goal of cutting the global cost of delivering data to one per cent of today’s levels within five to ten years. Only then, says internet.org, will it be “economically feasible” to provide basic internet services for everyone.

A large chunk of the initiative’s efforts is devoted to making networks and apps more cost efficient. By reducing network costs tenfold to deliver data, and developing more efficient applications to shave data usage by the same amount, internet.org says the hundredfold efficiency improvement can be achieved by multiplying the two savings together.

Internet.org has plenty of impressive industry muscle behind it, including Ericsson, Qualcomm and Nokia. No doubt they’ll be able to make significant technology improvements through deeper collaboration.

Even so, it’s a stretch to think internet.org alone can transform the business case for wider internet access.

For one thing, there’s still a paucity of national and international broadband in emerging markets. That makes backhaul capacity scarce and expensive. Internet.org doesn’t address this problem.

And while dents in power consumption through more efficient network gear is to be welcomed, the enormous cost of lugging diesel to where it’s needed remains a balance-sheet burden. (Diesel-powered generators are not uncommon in developing markets.) Again, internet.org has no answer here.

The alliance sees regulatory and policy reform as key in driving down “artificially high internet prices” in emerging markets. Comprising a group of private and public sector players, the alliance – initiated by the World Wide Web Foundation, a non-profit organisation founded by web pioneer Sir Tim Berners-Lee – has the target of entry-level broadband services priced at no more than 5 per cent of average monthly income.

The idea is to bring different stakeholders together in order to discuss and decide upon national policies that widen internet access. Reducing import duties on equipment and handsets, and cutting taxes on mobile services, are some of the areas the alliance is looking to explore. Coordinating with other infrastructure projects, such as laying fibre or ducts during road works, is another focus, as is allowing operators to share infrastructure and get easier access to public rights of way.

A mixture of better technology and more investor-friendly environments – along with stronger emerging-market economies – seems the best bet to realise the ambitions of both internet.org and A4AI.